Filing as head of household allows you to claim the standard deduction even if your spouse itemizes deductions and allows you to claim additional credits such as the dependent care credit and earned income credit.
The IRS may also tax you at a lower rate. If you file as head of household, your spouse must file as married filing separately. Once you are divorced, you may still file as head of household if you pay more than half the cost of maintaining your home for the tax year and your children live with you for more than half the tax year.
It depends. There is more than one type of separation , but not all separations are created equally. If you and your spouse stopped living together , stopped sharing expenses, and live separate lives, but neither of you filed official court documents, it will not change your tax status.
You qualify as married even if you are separated as long as there is no final divorce judgment ending your marital status. Legal separation available in some states is a legal process similar to a traditional divorce.
A legal separation follows the same steps as a divorce, but you're still legally married in the end. While a legal separation doesn't allow either spouse to remarry legally, it does permit both spouses to file as "Single" or "Head of household" for tax purposes if the court finalized the separation before December In , the United States Supreme Court issued a historic ruling legalizing same-sex marriage throughout the country. Obergefell v. Hodges, U.
Along with celebrating the right to marry and adopt children together, same-sex couples across the country also began enjoying the benefits and drawbacks of filing joint federal taxes. Like opposite-sex marriages, when a marriage doesn't work out, divorcing or separating spouses must file a joint return unless the court issued a final court order dissolving the marriage before December 31 of the tax year.
A few states continue to allow couples same-sex and opposite-sex to register as domestic partners. While couples can choose a domestic partnership to gain access to certain state rights, the federal government does not recognize domestic partnership for tax purposes.
Couples involved in a domestic partnership must file federal taxes as "Single. If the individuals have children and otherwise meet the IRS's requirements for a Head of household filing, either parent can file as "Head of household. For more information on how your domestic partnership impacts your federal taxes, visit the IRS website.
There are many tax issues and financial considerations to be aware of during a divorce. Make sure you take the time to understand these issues. If you have questions, speak with a qualified tax or divorce attorney in your area. The information provided on this site is not legal advice, does not constitute a lawyer referral service, and no attorney-client or confidential relationship is or will be formed by use of the site.
The attorney listings on this site are paid attorney advertising. In some states, the information on this website may be considered a lawyer referral service. For starters, if you haven't already done so, you need to file a new W-4 form with your employer to adjust the amount withheld from your paycheck.
But that's not all…you might also be facing alimony payments, child custody arrangements, home sales and other divorce-related issues that can affect your taxes. The last thing you need after a divorce is another problem to deal with. So, to reduce your anxiety level, here are 7 tips to make your return to single life a little more tax friendly.
Although splitting up is never easy, there's no reason to unnecessarily add extra stress. Your marital status as of December 31 controls your filing status. So, if you split up but aren't officially divorced before the end of the year, you can still file a joint return which is likely to save you money or choose the married-filing-separately status for the tax return you file for the year you separate.
You can also file as head of household and get the benefit of a bigger standard deduction and gentler tax brackets if you lived apart from your spouse for the last six months of the year, file separate returns, had a dependent living with you for more than half of the year, and paid more than half of the upkeep for your home.
Once you're divorced, you can file as a head of household if you have a dependent living with you for more than half of the year and you pay for more than half of the upkeep for your home or as a single taxpayer. You can deduct alimony you pay to an ex-spouse if the divorce agreement was in place before the end of Otherwise, it's not deductible or taxable to the recipient.
You also lose the deduction if the agreement is changed after to exclude the alimony from your former spouse's income. To qualify as deductible alimony, the cash-only payments must be spelled out in your divorce agreement.
You're required to report the Social Security number of your ex-spouse, too, so the IRS can make sure he or she reports the alimony as taxable income. As a general rule, only the custodial parent the one the kids live with most of the year can claim the child tax credit or credit for other dependents for a divorced couple's qualifying children.
Advance payments of the credit will also be paid each month from July to December What many people don't know is that it's perfectly legal for the noncustodial parent to claim one of these credits for a son or daughter if the other parent signs a waiver agreeing not to claim an exemption for the child on his or her return which means the custodial parent can't claim the credit.
Form must accompany the noncustodial parent's return each year he or she claims the credits for the child. This could make financial sense if the noncustodial parent is in a higher tax bracket. You file a separate return. A separate return includes a return claiming married filing separately, single, or head of household filing status.
You paid more than half the cost of keeping up your home for the tax year. Your spouse is considered to live in your home even if he or she is temporarily absent due to special circumstances. See Temporary absences , later. Your home was the main home of your child, stepchild, or foster child for more than half the year. See Qualifying person , later, for rules applying to a child's birth, death, or temporary absence during the year.
You must be able to claim the child as a dependent. The general rules for claiming a dependent are shown in Table 3. If you were considered married for part of the year and lived in a community property state one of the states listed later under Community Property , special rules may apply in determining your income and expenses.
You must have another qualifying person and meet the other requirements to file as head of household. You are keeping up a home only if you pay more than half the cost of its upkeep for the year. This includes rent, mortgage interest, real estate taxes, insurance on the home, repairs, utilities, and food eaten in the home.
Table 2 shows who can be a qualifying person. Any person not described in Table 2 isn't a qualifying person. Generally, the qualifying person must live with you for more than half of the year.
If your qualifying person is your father or mother, you may be eligible to file as head of household even if your father or mother doesn't live with you. However, you must be able to claim your father or mother as a dependent. Also, you must pay more than half the cost of keeping up a home that was the main home for the entire year for your father or mother. You are keeping up a main home for your father or mother if you pay more than half the cost of keeping your parent in a rest home or home for the elderly.
If the person for whom you kept up a home was born or died in , you may still be able to file as head of household. If the person is your qualifying child, the child must have lived with you for more than half the part of the year he or she was alive. If the person is anyone else, see Pub. You and your qualifying person are considered to live together even if one or both of you are temporarily absent from your home due to special circumstances such as illness, education, business, vacation, military service, or detention in a juvenile facility.
It must be reasonable to assume that the absent person will return to the home after the temporary absence. You must continue to keep up the home during the absence. You may be eligible to file as head of household even if the child who is your qualifying person has been kidnapped.
You can claim head of household filing status if all of the following statements are true. In the year of the kidnapping, the child lived with you for more than half the part of the year before the kidnapping. This treatment applies for all years until the earliest of:. The term "dependent" means:.
Table 3 shows the tests that must be met to be either a qualifying child or qualifying relative, plus the additional requirements for claiming a dependent. For detailed information, see Pub. You may be entitled to a child tax credit for each qualifying child who was under age 17 at the end of the year if you claimed that child as a dependent.
If you can't claim the child tax credit for a child who is an eligible dependent, you may be able to claim the credit for other dependents instead. See the Instructions for Forms and SR for details. In most cases, because of the residency test see item 3 under Tests To Be a Qualifying Child in Table 3 , a child of divorced or separated parents is the qualifying child of the custodial parent.
However, the child will be treated as the qualifying child of the noncustodial parent if the rule for children of divorced or separated parents or parents who live apart applies. Children of divorced or separated parents or parents who live apart. A child will be treated as the qualifying child of his or her noncustodial parent if all four of the following statements are true.
Are divorced or legally separated under a decree of divorce or separate maintenance,. Lived apart at all times during the last 6 months of the year, whether or not they are or were married. The child received over half of his or her support for the year from the parents. The child is in the custody of one or both parents for more than half of the year. The custodial parent signs a written declaration, discussed later, that he or she won't claim the child as a dependent for the year, and the noncustodial parent attaches this written declaration to his or her return.
If the decree or agreement went into effect after , see Divorce decree or separation agreement that went into effect after and before , or Post divorce decree or separation agreement , later.
See Child support under pre agreement , later. The custodial parent is the parent with whom the child lived for the greater number of nights during the year. The other parent is the noncustodial parent. If the parents divorced or separated during the year and the child lived with both parents before the separation, the custodial parent is the one with whom the child lived for the greater number of nights during the rest of the year.
A child is treated as living with a parent for a night if the child sleeps:. If the child lived with each parent for an equal number of nights during the year, the custodial parent is the parent with the higher adjusted gross income.
The night of December 31 is treated as part of the year in which it begins. For example, the night of December 31, , is treated as part of If a child is emancipated under state law, the child is treated as not living with either parent. See Examples 5 and 6. If, due to a parent's nighttime work schedule, a child lives for a greater number of days but not nights with the parent who works at night, that parent is treated as the custodial parent. On a school day, the child is treated as living at the primary residence registered with the school.
Example 1—child lived with one parent for a greater number of nights. In , your child lived with you nights and with the other parent nights. You are the custodial parent. In , your daughter lives with each parent for alternate weeks. In the summer, she spends 6 weeks at summer camp. Your son lived with you nights during the year and lived the same number of nights with his other parent, your ex-spouse. You are treated as your son's custodial parent because you have the higher adjusted gross income.
Your son normally lives with you during the week and with his other parent, your ex-spouse, every other weekend. You become ill and are hospitalized. The other parent lives in your home with your son for 10 consecutive days while you are in the hospital.
Your son is treated as living with you during this day period because he was living in your home. When your son turned age 18 in May , he became emancipated under the law of the state where he lives. Your daughter lives with you from January 1, , until May 31, , and lives with her other parent, your ex-spouse, from June 1, , through the end of the year.
She turns 18 and is emancipated under state law on August 1, Because she is treated as not living with either parent beginning on August 1, she is treated as living with you the greater number of nights in The custodial parent must use either Form or a similar statement containing the same information required by the form to make a written declaration to release a claim to an exemption for a child to the noncustodial parent.
Although the exemption amount is zero for tax year , this release allows the noncustodial parent to claim the child tax credit, additional child tax credit, and credit for other dependents, if applicable, for the child. The noncustodial parent must attach a copy of the form or statement to his or her tax return each year the custodial parent releases his or her claims.
The release can be for 1 year, for a number of specified years for example, alternate years , or for all future years, as specified in the declaration. Form doesn't apply to other tax benefits, such as the earned income credit, dependent care credit, or head of household filing status.
Divorce decree or separation agreement that went into effect after and before If the divorce decree or separation agreement went into effect after and before , the noncustodial parent may be able to attach certain pages from the decree or agreement instead of Form The decree or agreement must state all three of the following.
The noncustodial parent can claim the child as a dependent without regard to any condition, such as payment of support. The custodial parent won't claim the child as a dependent for the year. The years for which the noncustodial parent, rather than the custodial parent, can claim the child as a dependent.
The noncustodial parent must attach all of the following pages of the decree or agreement to his or her return. The pages that include all of the information identified in items 1 through 3 above. The signature page with the other parent's signature and the date of the agreement. The custodial parent must sign either a Form or a similar statement.
The only purpose of this statement must be to release the custodial parent's claim to an exemption. The noncustodial parent must attach a copy to his or her return. The form or statement must release the custodial parent's claim to the child without any conditions. For example, the release must not depend on the noncustodial parent paying support. The noncustodial parent must attach the required information even if it was filed with a return in an earlier year.
The custodial parent can revoke a release of claim to an exemption that he or she previously released to the noncustodial parent.
For the revocation to be effective for , the custodial parent must have given or made reasonable efforts to give written notice of the revocation to the noncustodial parent in or earlier. The custodial parent can use Part III of Form for this purpose and must attach a copy of the revocation to his or her return for each tax year he or she claims the child as a dependent as a result of the revocation. If you remarry, the support provided by your new spouse is treated as provided by you.
All child support payments actually received from the noncustodial parent under a pre agreement are considered used for the support of the child. This rule for divorced or separated parents also applies to parents who never married and lived apart at all times during the last 6 months of the year. If a child is treated as the qualifying child of the noncustodial parent under the rules for Children of divorced or separated parents or parents who live apart , earlier, see Applying the tiebreaker rules to divorced or separated parents or parents who live apart , later.
Sometimes, a child meets the relationship, age, residency, support, and joint return tests to be a qualifying child of more than one person. Although the child meets the conditions to be a qualifying child of each of these persons, only one person can actually claim the child as a qualifying child to take the following tax benefits provided the person is eligible.
To determine which person can treat the child as a qualifying child to claim these tax benefits, the following tiebreaker rules apply. If only one of the persons is the child's parent, the child is treated as the qualifying child of the parent. If the parents file a joint return together and can claim the child as a qualifying child, the child is treated as the qualifying child of the parents. If the child lived with each parent for the same amount of time, the IRS will treat the child as the qualifying child of the parent who had the higher adjusted gross income AGI for the year.
If no parent can claim the child as a qualifying child, the child is treated as the qualifying child of the person who had the highest AGI for the year. If a parent can claim the child as a qualifying child but no parent claims the child, the child is treated as the qualifying child of the person who had the highest AGI for the year, but only if that person's AGI is higher than the highest AGI of any of the child's parents who can claim the child. Subject to these tiebreaker rules, you and the other person may be able to choose which of you claims the child as a qualifying child.
You may be able to qualify for the earned income credit under the rules for taxpayers without a qualifying child if you have a qualifying child for the earned income credit who is claimed as a qualifying child by another taxpayer. You, your husband, and your year-old son lived together until August 1, , when your husband moved out of the household. In August and September, your son lived with you. For the rest of the year, your son lived with your husband, the boy's father.
Your son is a qualifying child of both you and your husband because your son lived with each of you for more than half the year and because he met the relationship, age, support, and joint return tests for both of you. At the end of the year, you and your husband still weren't divorced, legally separated, or separated under a written separation agreement, so the rule for children of divorced or separated parents or parents who live apart doesn't apply. You and your husband will file separate returns.
Your husband agrees to let you treat your son as a qualifying child. The facts are the same as in Example 1 except that you and your husband both claim your son as a qualifying child.
In this case, only your husband will be allowed to treat your son as a qualifying child. This is because, during , the boy lived with him longer than with you. If you claimed the child tax credit for your son, the IRS will disallow your claim to the child tax credit. Applying the tiebreaker rules to divorced or separated parents or parents who live apart. If a child is treated as the qualifying child of the noncustodial parent under the rules for children of divorced or separated parents or parents who live apart described earlier, only the noncustodial parent can claim the child tax credit or the credit for other dependents for the child.
However, the custodial parent, if eligible, or other eligible person can claim the child as a qualifying child for head of household filing status, the credit for child and dependent care expenses, the exclusion for dependent care benefits, and the earned income credit.
If the child is the qualifying child of more than one person for those tax benefits, the tiebreaker rules determine which person can treat the child as a qualifying child.
You and your 5-year-old son lived all year with your mother, who paid the entire cost of keeping up the home. Your son's father doesn't live with you or your son. Under the rules for children of divorced or separated parents or parents who live apart , your son is treated as the qualifying child of his father, who can claim the child tax credit for the child if he meets all the requirements to do so.
Because of this, you can't claim the child tax credit for your son. However, you agree to let your mother claim your son. The facts are the same as in Example 1 except that you and your mother both claim your son as a qualifying child for the earned income credit. Your mother also claims him as a qualifying child for head of household filing status. You, as the child's parent, will be the only one allowed to claim your son as a qualifying child for the earned income credit.
The IRS will disallow your mother's claim to the earned income credit and head of household filing status unless she has another qualifying child. Alimony is a payment to or for a spouse or former spouse under a divorce or separation instrument. Alimony is deductible by the payer, and the recipient must include it in income. Although this discussion is generally written for the payer of the alimony, the recipient can also use the information to determine whether an amount received is alimony.
To be alimony, a payment must meet certain requirements. There are some differences between the requirements that apply to payments under instruments executed after and to payments under instruments executed before General alimony requirements and specific requirements that apply to post instruments and, in certain cases, some pre instruments are discussed in this publication.
See Instruments Executed Before , later, if you are looking for information on where to find the specific requirements that apply to pre instruments. A decree of divorce or separate maintenance or a written instrument incident to that decree,. A decree or any type of court order requiring a spouse to make payments for the support or maintenance of the other spouse. This includes a temporary decree, an interlocutory not final decree, and a decree of alimony pendente lite while awaiting action on the final decree or agreement.
Payments under a divorce decree can be alimony even if the decree's validity is in question. A divorce decree is valid for tax purposes until a court having proper jurisdiction holds it invalid. An amendment to a divorce decree may change the nature of your payments. However, a retroactive amendment to a divorce decree correcting a clerical error to reflect the original intent of the court will generally be effective retroactively for federal tax purposes.
A court order retroactively corrected a mathematical error under your divorce decree to express the original intent to spread the payments over more than 10 years. This change also is effective retroactively for federal tax purposes. Your original divorce decree didn't fix any part of the payment as child support. To reflect the true intention of the court, a court order retroactively corrected the error by designating a part of the payment as child support. The amended order is effective retroactively for federal tax purposes.
Generally, you can deduct alimony you paid, whether or not you itemized deductions on your return. You must use Form or SR to deduct alimony you paid. Enter the amount of alimony you paid on Schedule 1 Form , line 18a. Enter your total payments on line 18a. Report alimony you received as income on Schedule 1 Form , line 2a.
If you are a U. However, many tax treaties provide for an exemption from withholding for alimony payments. Not all payments under a divorce or separation instrument are alimony.
Payments that are your spouse's part of community income, as explained later under Community Property ,. Under your written separation agreement, your spouse lives rent-free in a home you own and you must pay the mortgage, real estate taxes, insurance, repairs, and utilities for the home. Neither is the value of your spouse's use of the home. If they qualify, you may be able to deduct the payments for utilities as alimony. Your spouse must report them as income.
If you itemize deductions, you can deduct the real estate taxes and, if the home is a qualified home, you can also include the interest on the mortgage in figuring your deductible interest.
However, if your spouse owned the home, see Example 2 under Payments to a third party , later. If you owned the home jointly with your spouse, see Table 4. To determine whether a payment is child support, see the discussion under Certain Rules for Instruments Executed After , later.
If your divorce or separation agreement was executed before , see the revision of Pub. If both alimony and child support payments are called for by your divorce or separation instrument, and you pay less than the total required, the payments apply first to child support and then to alimony. Cash payments, checks, or money orders to a third party on behalf of your spouse under the terms of your divorce or separation instrument can be alimony, if they otherwise qualify.
These include payments for your spouse's medical expenses, housing costs rent, utilities, etc. The payments are treated as received by your spouse and then paid to the third party. Under your divorce decree, you must pay your former spouse's medical and dental expenses. If the payments otherwise qualify, you can deduct them as alimony on your return. Your former spouse must report them as alimony received and can include them in figuring deductible medical expenses. Under your separation agreement, you must pay the real estate taxes, mortgage payments, and insurance premiums on a home owned by your spouse.
If they otherwise qualify, you can deduct the payments as alimony on your return, and your spouse must report them as alimony received. Your spouse may be able to deduct the real estate taxes and home mortgage interest, subject to the limitations on those deductions. See the Instructions for Schedule A Form However, if you owned the home, see the example under Payments not alimony , earlier.
Alimony includes premiums you must pay under your divorce or separation instrument for insurance on your life to the extent your spouse owns the policy. If your divorce or separation instrument states that you must pay expenses for a home owned by you and your spouse or former spouse, some of your payments may be alimony.
See Table 4. However, if your spouse owned the home, see Example 2 under Payments to a third party , earlier. If you owned the home, see the example under Payments not alimony , earlier.
The following rules for alimony apply to payments under divorce or separation instruments executed after This requirement applies only if the spouses are legally separated under a decree of divorce or separate maintenance.
There is no liability to make any payment in cash or property after the death of the recipient spouse. Only cash payments, including checks and money orders, qualify as alimony.
Transfers of services or property including a debt instrument of a third party or an annuity contract. Cash payments to a third party under the terms of your divorce or separation instrument can qualify as cash payments to your spouse. See Payments to a third party under General Rules , earlier. Also, cash payments made to a third party at the written request of your spouse may qualify as alimony if all the following requirements are met. The payments are in lieu of payments of alimony directly to your spouse.
The written request states that both spouses intend the payments to be treated as alimony. You receive the written request from your spouse before you file your return for the year you made the payments. You and your spouse can designate that otherwise qualifying payments aren't alimony. You do this by including a provision in your divorce or separation instrument that states the payments aren't deductible as alimony by you and are excludable from your spouse's income.
For this purpose, any instrument written statement signed by both of you that makes this designation and that refers to a previous written separation agreement is treated as a written separation agreement and therefore a divorce or separation instrument.
If you are subject to temporary support orders, the designation must be made in the original or a later temporary support order. Your spouse can exclude the payments from income only if he or she attaches a copy of the instrument designating them as not alimony to his or her return. The copy must be attached each year the designation applies.
Payments to your spouse while you are members of the same household aren't alimony if you are legally separated under a decree of divorce or separate maintenance. A home you formerly shared is considered one household, even if you physically separate yourselves in the home. If all of the payments would continue, then none of the payments made before or after the death are alimony.
Your divorce decree states that the payments will end upon your former spouse's death. Whether or not such payments will be treated as not alimony depends on all the facts and circumstances. The payments will stop at the end of 6 years or upon your former spouse's death, if earlier. Your former spouse has custody of your minor children. The trust income and corpus principal are to be used for your children's benefit.
The payments will stop at the end of 15 years or upon your former spouse's death, if earlier. None of the annual payments are alimony. The result would be the same if the payment required at death were to be discounted by an appropriate interest factor to account for the prepayment. The amount of child support may vary over time. A payment will be treated as specifically designated as child support to the extent that the payment is reduced either:.
A contingency relates to your child if it depends on any event relating to that child. Events relating to your child include the child's:. Payments that would otherwise qualify as alimony are presumed to be reduced at a time clearly associated with the happening of a contingency relating to your child only in the following situations. The payments are to be reduced not more than 6 months before or after the date the child will reach 18, 21, or local age of majority.
The payments are to be reduced on two or more occasions that occur not more than 1 year before or after a different one of your children reaches a certain age from 18 to This certain age must be the same for each child, but need not be a whole number of years. Either you or the IRS can overcome the presumption in the two situations above.
This is done by showing that the time at which the payments are to be reduced was determined independently of any contingencies relating to your children.
For example, if you can show that the period of alimony payments is customary in the local jurisdiction, such as a period equal to one-half of the duration of the marriage, you can overcome the presumption and may be able to treat the amount as alimony.
If your alimony payments decrease or end during the first 3 calendar years, you may be subject to the recapture rule. If you are subject to this rule, you have to include in income in the third year part of the alimony payments you previously deducted. Your spouse can deduct in the third year part of the alimony payments he or she previously included in income.
The 3-year period starts with the first calendar year you make a payment qualifying as alimony under a decree of divorce or separate maintenance or a written separation agreement. The second and third years are the next 2 calendar years, whether or not payments are made during those years.
The reasons for a reduction or end of alimony payments that can require a recapture include:. Payments required over a period of at least 3 calendar years that vary because they are a fixed part of your income from a business or property, or from compensation for employment or self-employment. Payments that decrease because of the death of either spouse or the remarriage of the spouse receiving the payments before the end of the third year.
Both you and your spouse can use Worksheet 1 to figure recaptured alimony. If you must include a recapture amount in income, show it on Schedule 1 Form , line 2a "Alimony received". Cross out "received" and enter "recapture. If you can deduct a recapture amount, show it on Schedule 1 Form , line 18a "Alimony paid". Cross out "paid" and enter "recapture. See the worksheet that was completed for this example. Information on pre instruments was included in this publication through If you need the revision, please visit IRS.
The examples below illustrate the tax treatment of alimony payments under the post alimony rules. In each of the examples, assume the payments qualify as alimony under the Internal Revenue Code of On December 2, , a court executed a divorce decree providing for monthly alimony payments beginning January 1, , for a period of 8 years.
On May 15, , the court modified the divorce decree to increase the amount of monthly alimony payments. The first increased alimony payment was due on June 1, The modification didn't expressly provide that the post- alimony rules apply to alimony payments made after the date of the modification. Assume the same facts as in Example 1 above except the modification expressly provided that the post alimony rules apply. On December 2, , a couple executed a written separation agreement providing for monthly alimony payments on the first day of each month, beginning January 1, , for a period of 8 years.
On October 1, , a couple executed a written separation agreement subject to the laws of State X. Under the laws of State X, at the time of divorce, a written separation agreement may survive as an independent contract. In the process of obtaining their divorce, the couple decided their separation agreement will remain an independent contract and won't be incorporated or merged into their divorce decree.
The divorce decree did not mention alimony. A qualified domestic relations order QDRO is a judgment, decree, or court order including an approved property settlement agreement issued under a state's domestic relations law that:. Recognizes someone other than a participant as having a right to receive benefits from a qualified retirement plan such as most pension and profit-sharing plans or a tax-sheltered annuity;. Relates to payment of child support, alimony, or marital property rights to a spouse, former spouse, child, or other dependent of the participant; and.
Specifies certain information, including the amount or part of the participant's benefits to be paid to the participant's spouse, former spouse, child, or other dependent. Benefits paid under a QDRO to the plan participant's child or other dependent are treated as paid to the participant.
For information about the tax treatment of benefits from retirement plans, see Pub. Benefits paid under a QDRO to the plan participant's spouse or former spouse must generally be included in the spouse's or former spouse's income. If the participant contributed to the retirement plan, a prorated share of the participant's cost investment in the contract is used to figure the taxable amount.
The spouse or former spouse can use the special rules for lump-sum distributions if the benefits would have been treated as a lump-sum distribution had the participant received them. For this purpose, consider only the balance to the spouse's or former spouse's credit in determining whether the distribution is a total distribution.
See Lump-Sum Distributions in Pub. If you receive an eligible rollover distribution under a QDRO as the plan participant's spouse or former spouse, you may be able to roll it over tax free into a traditional individual retirement arrangement IRA or another qualified retirement plan.
For more information on the tax treatment of eligible rollover distributions, see Pub. The following discussions explain some of the effects of divorce or separation on traditional individual retirement arrangements IRAs. You can deduct only contributions to your own traditional IRA. Starting from the date of the transfer, the traditional IRA interest transferred is treated as your spouse's or former spouse's traditional IRA.
All taxable alimony you receive under a decree of divorce or separate maintenance is treated as compensation for the contribution and deduction limits for traditional IRAs.
Generally, there is no recognized gain or loss on the transfer of property between spouses, or between former spouses if the transfer is because of a divorce. You may, however, have to report the transaction on a gift tax return. See Gift Tax on Property Settlements , later. If you sell property that you own jointly to split the proceeds as part of your property settlement, see Sale of Jointly-Owned Property , later.
Generally, no gain or loss is recognized on a transfer of property from you to or in trust for the benefit of :. Certain transfers in trust , discussed later. Certain stock redemptions under a divorce or separation instrument or a valid written agreement that are taxable under applicable tax law, as discussed in Regulations section 1.
The term "property" includes all property whether real or personal, tangible or intangible, or separate or community. It includes property acquired after the end of your marriage and transferred to your former spouse. After the transfer, the interest is treated as your spouse's HSA. After the transfer, the interest is treated as your spouse's Archer MSA. A property transfer is related to the end of your marriage if both of the following conditions apply. The transfer is made under your original or modified divorce or separation instrument.
The transfer occurs within 6 years after the date your marriage ends. Unless these conditions are met, the transfer is presumed not to be related to the end of your marriage. However, this presumption won't apply if you can show that the transfer was made to carry out the division of property owned by you and your spouse at the time your marriage ended. For example, the presumption won't apply if you can show that the transfer was made more than 6 years after the end of your marriage because of business or legal factors that prevented earlier transfer of the property and the transfer was made promptly after those factors were taken care of.
If you transfer property to a third party on behalf of your spouse or former spouse, if incident to your divorce , the transfer is treated as two transfers. A transfer of the property from you to your spouse or former spouse. An immediate transfer of the property from your spouse or former spouse to the third party.
For this treatment to apply, the transfer from you to the third party must be one of the following. Consented to in writing by your spouse or former spouse. The consent must state that both you and your spouse or former spouse intend the transfer to be treated as a transfer from you to your spouse or former spouse subject to the rules of Internal Revenue Code section You must receive the consent before filing your tax return for the year you transfer the property.
However, you must recognize gain or loss if, incident to your divorce, you transfer an installment obligation in trust for the benefit of your former spouse. For information on the disposition of an installment obligation, see Pub. You must also recognize as gain on the transfer of property in trust the amount by which the liabilities assumed by the trust, plus the liabilities to which the property is subject, exceed the total of your adjusted basis in the transferred property.
You transfer the property in trust for the benefit of your spouse. You should report income from property transferred to your spouse or former spouse as shown in Table 5. For information on the treatment of interest on transferred U. When you transfer property to your spouse or former spouse, if incident to your divorce , you must give your spouse sufficient records to determine the adjusted basis and holding period of the property on the date of the transfer.
If you transfer investment credit property with recapture potential, you must also provide sufficient records to determine the amount and period of the recapture. Property you receive from your spouse or former spouse, if the transfer is incident to your divorce is treated as acquired by gift for income tax purposes. Your basis in property received from your spouse or former spouse, if incident to your divorce is the same as your spouse's adjusted basis.
This applies for determining either gain or loss when you later dispose of the property. It applies whether the property's adjusted basis is less than, equal to, or greater than either its value at the time of the transfer or any consideration you paid. It also applies even if the property's liabilities are more than its adjusted basis.
This rule generally applies to all property received after July 18, , under a divorce or separation instrument in effect after that date. It also applies to all other property received after for which you and your spouse or former spouse made a "section election" to apply this rule. For information about how to make that election, see Temporary Regulations section 1.
Karen and Don owned their home jointly. Karen transferred her interest in the home to Don as part of their property settlement when they divorced last year. Don's basis in the interest received from Karen is her adjusted basis in the home. His total basis in the home is their joint adjusted basis. Your basis in property received in settlement of marital support rights before July 19, , or under an instrument in effect before that date other than property for which you and your spouse or former spouse made a "section election" is its fair market value when you received it.
Larry and Gina owned their home jointly before their divorce in That year, Gina received Larry's interest in the home in settlement of her marital support rights. Gina's basis in the interest received from Larry is the part of the home's fair market value proportionate to that interest.
Her total basis in the home is that part of the fair market value plus her adjusted basis in her own interest. If the transferor recognizes gain on property transferred in trust, as described earlier under Transfers in trust , the trust's basis in the property is increased by the recognized gain.
See Gift Tax Return , later. For more information about the federal gift tax, see Estate and Gift Taxes in Pub.
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